Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — Debt Investor Presentation (2016)
39 slides from Aurizon's debt investor presentation, 2016
Slide 1: Debt Investor Update 1HFY2016 Results
Debt Investor Update 1HFY2016 Results Pam Bains – VP Network Finance (Network CFO) David Collins – VP Finance & Group Treasurer
Slide 2: Important notice
Important notice No Reliance on this document This document was prepared by Aurizon Holdings Limited (ACN 146 335 622) (referred to as “Aurizon” which includes its related bodies corporate). Whilst Aurizon has endeavoured to ensure the accuracy of the information contained in this document at the da
Slide 3: Agenda
Agenda Half year in review – Aurizon Group › David Collins FOR PERSONAL USE ONLY Half year in review – Aurizon Network › Pam Bains Capital Overview › David Collins or Pam Bains Regulation & Customers › Pam Bains Global Markets › David Collins 3
Slide 4: Half year in review
Half year in review David Collins – VP Finance & Group Treasurer Pam Bains – VP Network Finance
Slide 5: Aurizon Group
Aurizon Group David Collins – VP Finance & Group Treasurer
Slide 6: About Aurizon
About Aurizon Aurizon (ASX: AZJ) is Australia’s largest rail freight operator and a • Aurizon Holdings legal structure top 50 ASX company. Aurizon has four major product lines for customers: Coal, Iron Ore, Freight and Network. Above Rail FOR PERSONAL USE ONLY › Aurizon transports more than 250 mill
Slide 7: Group highlights – 1HFY2016
Group highlights – 1HFY2016 Safety › ZERO LTIFR, a first for Aurizon. TRIFR increased 25% versus 2HFY2015 Results › Revenue down 11% to $1.76bn, underlying EBIT down 17% to $403m › Excluding previously announced items, revenue down 4%, underlying EBIT down 2% against 5% volume FOR PERSONAL USE ONLY
Slide 8: Group financial highlights
Group financial highlights $m 1HFY2016 1HFY2015 Variance FOR PERSONAL USE ONLY › Sale of Redbank and impact of expired revenue contracts in Revenue 1,758 1,965 (11%) FY2015 and 5% volume decline in 1HFY2016 › Includes $16m one off cost of employee shares and $18m EBIT – underlying1 403 486 (17%) QNI
Slide 9: Coal customer update
Coal customer update Aurizon’s customer quality remains strong and Contract protection remains, delivering value for resilient through the cycle both parties › Volumes split by coal type › New form contracts – 80% of 1HFY2016 volumes › Total: 51% metallurgical, 49% thermal › 96% new form by FY2018 F
Slide 10: Aurizon's value focus remains
Aurizon’s value focus remains › Investment fundamentals have not changed › Stable, defensive, regulated Below Rail business › Resilient Above Rail business due to strong counterparties and revenue contract protection, but high fixed cost and sensitive to short term volume fluctuations FOR PERSONAL U
Slide 11: Aurizon Network
Aurizon Network Pam Bains – VP Network Finance
Slide 12: Below Rail highlights
Below Rail highlights EBIT uplift driven by higher revenue based on UT4 Consolidated Draft Decision Revenue › Increased 10% to $581m with revenue based on Consolidated Draft Decision (CDD) from December 2015 FOR PERSONAL USE ONLY EBIT › Increased 12% ($27m) to $245m, 61% of the group result (underly
Slide 13: Aurizon Network: Profit & Loss - Underlying
Aurizon Network: Profit & Loss - Underlying 1H 2H Variance Commentary $m fav / (adv) FY2016 FY2015 FY2015 Tonnes (Million) 114.0 114.7 (1%) 111.0 › Revenue increased 10% due to regulatory FOR PERSONAL USE ONLY revenue yield increasing as revenue aligns NTKs (Billion) 28.9 28.4 2% 27.8 with the QCA’s
Slide 14: Aurizon Network Volumes (mt)
Aurizon Network Volumes (mt) (1) 1H Variance 2H FY2016 FY2015 fav / (adv) FY2015 Newlands 6.1 8.0 (24%) 6.6 Goonyella 59.8 60.1 (0%) 59.6 FOR PERSONAL USE ONLY Blackwater 30.8 32.5 (5%) 30.3 Moura 6.5 6.5 0% 5.7 GAPE 7.9 7.6 4% 7.8 WIRP 2.9 - 0.9 Total 114.0 114.7 (1%) 110.9 Average haul length2 (km
Slide 15: Aurizon Network Balance Sheet
Aurizon Network Balance Sheet As at ($m) 31 Dec 2015 30 June 2015 Commentary Total current assets 282 376 › Decrease in total current assets primarily due to a FOR PERSONAL USE ONLY $113m decrease in cash holdings, which were Property, plant & equipment 5,407 5,360 higher at year end to ensure that
Slide 16: Growth in Aurizon Network's RAB
Growth in Aurizon Network’s RAB • Aurizon Network’s RAB¹ over time (A$bn) › QCA determines Aurizon Network's access pricing based on the estimated value of the RAB › RAB value of A$4.5bn (excluding assets subject to access facilitation +86% FOR PERSONAL USE ONLY deeds1) as at June 30, 2013 › The QCA
Slide 17: Aurizon Network: Capital Structure
Aurizon Network: Capital Structure Aurizon Network RAB – Gearing Structure Commentary 7,000 60.6% 53.0% 53.0% 48.4% › All material growth projects were completed by FOR PERSONAL USE ONLY 6,000 5,600 December 2015 5,000 4,900 4,700 › Aurizon Network’s Net Debt position in the medium 4,500 term is exp
Slide 18: Aurizon Network: Key Financial Metrics
Aurizon Network: Key Financial Metrics FOR PERSONAL USE ONLY Source: http://www.aurizon.com.au/investors/overview/ Historical Financials to 31December2015 18
Slide 19: Capital Overview
Capital Overview David Collins – VP Finance & Group Treasurer Pam Bains – VP Network Finance
Slide 20: Capex update
Capex update Capital expenditure FY2015 – FY2017 ($m)1 1,107 › Forecast capex spend reduced $150-200m over next 18 months in light of current trading conditions FOR PERSONAL USE ONLY ~$1,100m › Committed growth programs winding down – WIRP, 472 Whitehaven rollingstock and Hexham › Transformation and
Slide 21: Aurizon Network: Capital Program Delivery
Aurizon Network: Capital Program Delivery Wiggins Island Rail › WIRP is the staged development of new rail lines and upgrading of existing lines to service the new Project (WIRP) Wiggins Island Coal Export Terminal at the Port of Gladstone › Commenced: FY2012 › All rail infrastructure required for t
Slide 22: Aurizon Network: Capital Expenditure
Aurizon Network: Capital Expenditure Capacity Completion / Construction Period Total Capital Major Growth Projects Increment Notes Estimated Completion1 (years) ($m) (mtpa) On time, GAPE January 2012 2.0 1,100 33 on budget FOR PERSONAL USE ONLY On time, WIRP March 2015 / December 2015 4.0 799 27 on
Slide 23: Wiggins Island Rail Project (WIRP)
Wiggins Island Rail Project (WIRP) › WIRP is a project designed to link mines in the Southern Bowen Basin with the new Wiggins Island Coal Export Terminal (WICET) at the Port of Gladstone and will increase the total capacity of the Moura and Blackwater systems by 27mtpa (30%). Total estimated spend
Slide 24: WIRP Fast Facts
WIRP Fast Facts › Wiggins Island Rail Project (WIRP) Stage 1 will facilitate transport of 27mtpa of coal to the new Wiggins Island Coal Export Terminal (WICET) › 33% increase in export tonnage transported in the Blackwater and Moura systems (81mtpa to 108mtpa) › $0.8bn(1) investment in new and upgra
Slide 25: Funding Update
Funding Update Funding activity Above Rail $0.350bn maturity profile Drawn Debt Undrawn Debt › Bank debt facilities of $490m repriced in December 2015 $m FOR PERSONAL USE ONLY and maturity extended to FY2022 50 › Interest cost on drawn debt 4.65%, down from 4.9% › Liquidity at 31 December 2015 $613m
Slide 26: Regulation & Customers
Regulation & Customers Pam Bains – VP Network Finance
Slide 27: Aurizon Network's 2014 Draft Access Undertaking (UT4) Status
Aurizon Network’s 2014 Draft Access Undertaking (“UT4”) Status › The Queensland Competition Authority (“QCA”) published its Draft Decision on Aurizon Network’s UT4 Maximum Allowable Revenue (“MAR”) for the period of the next undertaking on 30 September 2014 FOR PERSONAL USE ONLY › The decision detai
Slide 28: Regulated revenues within a stable and well-established regulatory regime
Regulated revenues within a stable and well- established regulatory regime Well established regulatory Well developed building block approach to 1 regime 2 Stable regulated revenue base 3 revenue determination › Over 90% of Aurizon Network › The provision of transportation FOR PERSONAL USE ONLY serv
Slide 29: Long term customer relationships
Long term customer relationships FY15 revenues (split by Aurizon Network customers) › In FY15, ~68% of our regulated coal access revenue was derived from access agreements with Aurizon Holdings, while ~32% was 68% derived from other above rail operators (including Pacific National) FOR PERSONAL USE
Slide 30: Regulatory framework provides revenue protection through a building block approach
Commercial In Confidence The CQCN regulatory framework provides revenue protection through a building block approach Regulatory Revenue Total Actual Revenue Protection Maximum Allowable Revenue (forecasted) for each year of Tests Undertaking period RETURN ON CAPITAL AT1 Outside the revenue protectio
Slide 31: Take-or-Pay protection should revenues fall short
Commercial In Confidence … with Take-or-Pay protection should revenues fall short (with a revenue cap) ToP › Primary revenue protection mechanism available to AT2 Train Paths Take-or-pay Aurizon Network Revenue cap Take or FOR PERSONAL USE ONLY pay AT3 Net Train Kilometres (NTK) mechanisms › Allows
Slide 32: Regulatory process has become more complex and time consuming
Commercial In Confidence The regulatory process has become more complex, resource-intensive and time consuming since the rail network was first declared in 1998 CQCN Regulation Overview UT4 Overview CQCN Regulation Evolution UT4 Development and Key Milestones Jun 2016 FOR PERSONAL USE ONLY UT4 Imple
Slide 33: Global Markets
Global Markets David Collins – VP Finance & Group Treasurer
Slide 34: Strong underlying macroeconomic drivers support long term coal volumes
Strong underlying macroeconomic drivers support long term coal volumes FOR PERSONAL USE ONLY 1 Australia is the world’s largest exporter of seaborne coal 2 Close proximity to Asia gives Australia a competitive advantage Queensland has the largest coal resource in Australia with a long 3 production l
Slide 35: Queensland has the largest coal resources in Australia
Queensland has the largest coal resources in Australia with a long production life The Queensland coal industry is the largest in Australia, with more than 78bt of coal resource, including 39bt located in the Bowen Basin region serviced by the CQCN Queensland coal endowment FOR PERSONAL USE ONLY (Re
Slide 36: Close proximity to Asia gives Australia a competitive advantage
Close proximity to Asia gives Australia a competitive advantage Metallurgical coal seaborne exports Australia’s metallurgical coal exports Volume and market share, calendar years by destination (CY15) › Australian volume resilient to date with EU-28 2015 export volume broadly steady on the 400 70 So
Slide 37: Questions & Answers
Questions & Answers
Slide 38: Definitions
Definitions Metric Description Access Revenue Amount received for access to the Network infrastructure under the Access Agreement Average haul length NTK/Total tonnes Contract utilisation Total volumes hauled as a percentage of total volumes contracted CQCN Central Queensland Coal Network dGTK Diese
Slide 39: s AURIZON.
s 2 AURIZON.